Apple reported fiscal fourth-quarter results after the close Monday. There were several pressing topics on the table: any signal on sales of the lower-cost iPhone 5C, Apple’s presence in China, competition in the tablet market, and the company’s bulky cash position (and Carl Icahn‘s designs on it). The company’s conference call began shortly after 5 p.m. ET. Here’s a recap.

Thanks for stopping by the live blog. Make sure to leave your thoughts in the comments field. We’ve listed a few headline items we’re looking for in the intro above, but we’ll get into some more detail now while we wait for the numbers to cross the wire.

There is no item more important to Apple’s health than the iPhone. Apple said it moved some nine million iPhones when a pair of new devices went on sale last month. Were those from the higher-end 5S model or the less-costly 5C? All signs indicate the 5S is flying off the shelves; the 5C, meanwhile, is getting discounted at Wal-Mart and Target, for example.

Apple doesn’t break out specifics on models, but questions on these lines are bound to come up during the call.

The iPad is the other compelling storyline for Apple. It just released two new models — a successor to the mini and a new iPad Air. Analysts expect Apple sold roughly as many of the devices in the fourth quarter as a year earlier — 14 to 15 million or so.

In the third quarter, Apple sold fewer than a year earlier, blaming a tough comparison. There’s no question the iPad is still popular.

The question is just how much competitors are eroding Apple’s share of the tablet market. There’s Samsung, Amazon, Nokia and others. Microsoft, in its most recent report, was pretty optimistic about how the Surface was doing, and the Surface had a rough coming out party.

But it’s worth keeping in mind that Apple’s results will reflect sales through the end of September. So there will be that burst of launch weekend iPhones — the nine million or so — but nothing from the snowball of sales into October. The recently announced iPads, too, aren’t a factor. Those will all be fiscal first-quarter stories.

Carl Icahn’s strongarming over Apple’s cash position is bound to come up during the conference call. Apple hasn’t taken much of a public stance on the matter. I’d expect the company to say it is pleased to have Icahn as a shareholder, and that it listens to all of its stakeholders’ concerns. But it will be increasingly difficult for Apple to demur on Icahn’s suggestion that the company go as big as $150 billion on a buyback (that’s about how much Apple has in cash). Apple is doing a buyback in the $60 billion range.

Apple’s decision to make several of its apps and its “Mavericks” operating system free kicked up quite the debate online. Is it a shot at Microsoft? Is it smart play on security and code management? Is it a Trojan horse to get people to update devices. (All of the above?)

Questions on these lines should be fun — so long as Apple doesn’t cave and claim generosity to the consumer. Though, it is hard to argue free isn’t generous.

Some good points in the comments field already — context about Amazon’s earnings, why retailers discount the 5C and the importance of the next quarter in judging sales of the new devices. All good.

To the readers: On Amazon, investors are really looking for growth above all else. And that’s why a bulging revenue number matters so much. Apple is a more mature company, and something like margins sticks out as more important.

And true on the 5C, the discounting is aimed at getting people into those stores. They will spend the $20 or so in savings on other stuff — likely spend even more. But keep in mind the 5S wasn’t discounted.

Yes, too. Sales next quarter are the better reflection of iPhone demand. This quarter, its about seeing what Cook and Co. say during the call.

Apple sees Q1 margin between 36.5% and 37.5%. Those margins will likely bump up in the future quarters as the company gets more efficient at rolling its newer products off the lines, and component costs go down. (The retail price, however, likely won’t.)

“We’re pleased to report a strong finish to an amazing year with record fourth quarter revenue, including sales of almost 34 million iPhones,” said Tim Cook, Apple’s CEO. “We’re excited to go into the holidays with our new iPhone 5c and iPhone 5s, iOS 7, the new iPad mini with Retina Display and the incredibly thin and light iPad Air, new MacBook Pros, the radical new Mac Pro, OS X Mavericks and the next generation iWork and iLife apps for OS X and iOS.”

There is no definite number for expectations of unit sales. The iPhone sales came a bit shy of what the WSJ had in its “What to Watch” earlier today. We said analysts expected between 34 and 35 million iPhones. What Apple reported was well above the prior year.

As for the iPad, sales came in at the low end of the 14 to 15 million expected in our walk-up blog post and was right about where sales were a year ago.

Here’s the first cut at the earnings story by Ian Sherr and John Kell. We’ll keep blogging, but this story will get updated through the night. The two point out that it is the third-straight drop in quarterly earnings for Apple.

A PSA: The conference call is scheduled for 10 mins from now. The field is playable now on the investor site if you want to listen in. But remember, you need to stream from an Apple device or a Mac running QuickTime. Which is absurd, but there you have it. If you are on a PC running Windows or Linux or whatnot, you’ll need an alternative plan. (Consider this blog, if you please.)

UPDATE: Several readers said they were able to listen to the call on a PC using QuickTime. I didn’t get to check that in real-time, but if so, great. I went back to the streaming site, and it does say “any PC running QuickTime 7 or later.) Not sure how I missed that, but thanks to the readers for pointing that out.

Here’s the press release, with a data download link, on Apple’s site. Meantime, let’s get a game going: How many times will “TV” be mention, but not the set-top box, the TV set. And how many times will “watch” be said. I’m going with two on “TV” and four on “watch.”

Yes, Apple beat handily on its per-share target, but that’s not really where investors are looking. Sales of iPad units were down from the prior quarter and flat vs. a year ago. The iPhone unit sales were decent compared with a quarter and a year ago, but they ran aground on Wall Street’s forecasts.

One interesting item: Greater China sales were up 24% from the third quarter. Can’t tell looking at the table if that is mainland, though.

One more thought: Retail store was up from a quarter and a year ago. With the new hire from Burberry, Angela Ahrendts, wonder if Apple will speak more on this.

Cook says Apple made 15 acquisitions. And points out Apple returned $36 billion to shareholders in dividends and repurchases in the past five quarters. He is spending a lot of time on how Apple decides what to do with its cash. Translation: We already listen to our shareholders, we are open to ideas and the board makes deliberate, careful decisions.

There were a lot of specific mentions of this school district using iPads, and this Chinese company using iPhones. It is bordering on the president calling out three or four people to stand up during the State of the Union address.

Oppenheimer is running through all of the software that Apple is making free. He says as a result (accounting stuff coming): the company is deferring a greater portion of sales from devices, some plus-$900 million in net revenue.

Question: Why isn’t December margin guidance better? What are the headwinds? Oppenheimer refers to prepared remarks. Talks about that deferred revenue, which affects margin. Says the new iPads have a higher cost structure — so do Macs. He also blames FX. Every company blames currency.

A question on hardware choices: Why does an iPhone need a 64-bit ARM, for example? Cook says the hardware is a long road. He is getting in a mention of how awesome the fingerprint sensor is. But it’s a good point: innovations in hardware aren’t always for the near-term. The apps of next year will need the horsepower.

Now that the iPhone 5C has been out, what think of the price now? What are you doing to make costs lower for customers? Cook runs through the product category, including the entry-level 4S. He says he wants all of those categories to grow — basically, doesn’t want a 4S cannibalizing a 5S.

Cook said the 5C as an entry-level device was a “rumor” — the 4S is entry.

A question on new-product categories. Should there be an expectation coming soon? (TV or watch not mentioned specifically. And no, this isn’t Gene Munster asking.)

Cook clarifies that in terms of timing, he only said we’d see new “products” in this year and next. That doesn’t mean new “categories.” Cook says he never said categories in April. Someone will have to check the notes.

On pricing strategy and elasticity: Why didn’t the 4S bump down toward $400. Price points seem higher than 3 months ago. What should analysts’ think? What did Apple learn from the 4 — why not keep the 4? (This follow up is like 5 follow-up questions.)

Cook clarified: The $400 number is yours, not mine. There is a bit of swordplay so far over who said what back when.

Question: China. Congrats on being the only company in the sector that grew there, some 6%.

(Ed note: That was “Greater” China. Is that mainland, or + Hong Kong and elsewhere? Hoping someone asks this, or I have some homework.)

Cook: We had a pretty good quarter. We want to do better. We were able to launch a product in the first round this quarter, including recently announced iPads. A year ago, iPad launched late in China, and that pressured the 6% figure.

Follow-up is an accounting question: there is some confusion on the deferred revenue, the $900 million and margins. Oppenheimer says Apple had been deferring from iDevice and Mac already. Apple has increased those deferrals. Apple says it will defer $900 million more in Q1 from Q4, and that goes straight through gross margin.

Question on deferrals again. The follow up: Beyond December on iPhone gross margins. Any structural changes for analysts to think about when coming up with 2014 models? Oppenheimer says company is benefitting from sequential increase in revenue, expect to defer less in March quarter. Fighting to get down cost curves.

Bonus follow on iPad and growth rate. And separately, any difference between iPad and iPhone upgrade behavior? (That’s a new question from Munster – don’t recall a behavioral question before.)

Cook says market share isn’t what they care about, but usage and satisfaction. Cook says it expects growth, good start with iPad Air. (Name drop.) Mentions the $299 price point to get a hold of the ecosystem. Now talking up Air as incredible. “It’s going to be an iPad Christmas.”

Question: Why make all that software free? Cook says he wanted people to know fully what it was to be part of the very latest software, the best features. “Some other folks charge $199″ for each – OS and productivity. He means Microsoft. Free software is “another reason to own a Mac.”

Follow: Is Google making in-roads in education with low-price Chromebooks? Cook: We had our best education quarter ever. First time over $1 billion. PC market was down. “We feel like we are doing great on both fronts” — iPads and Mac. “We do see Chromebooks in some places,” but vast majority is buying PC/Mac.

Question: A year ago was a big multiproduct launch and there were constraints. This year, are you better at managing supply? Cook says he feels good about what Apple is doing. Mentions iPad Mini and Air again.

One key difference vs last year, he says: iMac went 2 months with minimal sales cause of announce v ship dates. That let to some down numbers,

Question: iPhone ASPs (average selling price) were down in the quarter. Supply availability issue? Oppenheimer says sequentially it was flat. So year over year, yes down 7%, but that was cause of a significant increase of sales in entry SKUs. And then FX headwinds. Declines to forecast for next quarter.

Follow up on subsidies and carriers. Cook doesn’t see any big changes. Some carriers have different plans for people who want to upgrade more often, but those programs “probably reduce the subsidy” for someone in aggregate. Customer may like that to get new tech.

Comments (5 of 58)

Tim Cook is wrong about "categories"
From April call transcript,
Gene E. Munster – Piper Jaffray, Inc.
"Hey, good afternoon. Tim, I just wanted to confirm, did you mention in your prepared remarks that something about new product categories or did I not hear you correctly?"
Tim Cook
"I did, Gene. I said that one of our areas for growth are potential new categories, and we’re very excited about those."

9:10 pm October 28, 2013

Domi wrote:

Thanks Brian. But if it were a surer bet than not, everyone would make that same bet and arbitrage away any chance of profiting from it.

We'll see where AAPL opens tomorrow, but buying puts ahead of the announcement may well pay off this time around at least.

To be honest, I'm long the stock but taking into consideration the negative market sentiment toward AAPL, which makes the put strategy a good hedge.

8:52 pm October 28, 2013

Mr.Nay Lin wrote:

Apple,I'm with u. You are the greatest among the smart. I'm waiting your new and your iPhone. And 5S is the great one.:-)

7:51 pm October 28, 2013

Mike wrote:

The Apple, Buy Back program will post soon.

Editor Comment

6:37 pm October 28, 2013

Brian R. Fitzgerald wrote:

Domi, I am willing to give you a nod of the head on your call. But to be fair, that's like betting on the Yankees. It's a surer bet than not.